Nepal’s vibrant rivers and mountainous terrain have long been recognized for their hydroelectric potential. Recent developments have turned this potential into reality, with Nepal transitioning from an energy-deficit nation to a net exporter of electricity. This shift marks a significant transformation in the country’s economic landscape, fostering new prospects for addressing its persistent trade deficit. As the nation looks ahead, it seeks to leverage its hydropower assets to revitalize its economy. This article delves into recent milestones, historical challenges, and the bright prospects of Nepal’s electricity exports, examining how these factors can drive change and growth.
Rising Electricity Trade Between Nepal and India
In a significant step forward, India has approved plans to import an additional 251 MW of electricity from Nepal, bringing the total imports close to 1,000 MW. This marks a substantial increase compared to just a few years ago and highlights burgeoning energy cooperation between the two countries. The approval encompasses electricity from 12 more hydropower projects across Nepal, signaling a robust and mutually beneficial bilateral trade relationship.
This decision aligns with a newly inked long-term energy agreement, wherein India has committed to purchasing 10,000 MW of electricity from Nepal over the next decade. Such agreements not only underscore the growing energy partnership but also set the stage for unprecedented economic opportunities for Nepal. By transforming its vast hydropower resources into export commodities, Nepal stands poised to make significant strides in economic development and regional energy security.
Economic Uplift from Power Exports
The economic landscape of Nepal has shifted dramatically due to its burgeoning electricity exports. In the last fiscal year, Nepal exported 1.94 billion units of electricity, generating revenue worth Rs17.07 billion. During the dry season, the country imported 1.91 billion units, costing Rs16.93 billion, resulting in a net positive revenue stream for the first time. This transition to a net exporter of electricity represents a major accomplishment for Nepal’s economy.
Projections for the current fiscal year are even more optimistic. If Nepal successfully exports close to 1,000 MW, the revenue could soar to Rs27 billion. This positive net revenue from power exports is a stark contrast to the situation just five years ago, when the nation grappled with severe electricity shortages and daily load-shedding. The economic uplift from these exports is poised to contribute significantly to Nepal’s GDP and create new opportunities for economic diversification and growth.
Historical Struggles and Infrastructure Growth
From 2007 to 2017, Nepal faced severe electricity shortages that crippled its economy and disrupted daily life. The frequent power outages hindered industrial growth and stunted economic progress. The significant turnaround began with the commissioning of the 456 MW Upper Tamakoshi Hydropower Project in 2021, which played a pivotal role in shifting the country towards a power surplus. This landmark project marked the beginning of Nepal’s journey to energy self-sufficiency.
Today, Nepal boasts an installed electricity generation capacity of 3,156.96 MW, predominantly sourced from hydropower. This growth is not merely a statistic but a marker of Nepal’s strategic development in renewable energy infrastructure. The government’s commitment to expanding its energy capabilities is evident, with ongoing investments improving the country’s ability to generate and export electricity. The development of these infrastructures represents a fundamental shift towards a more sustainable and self-reliant energy sector.
Future Aspirations and Development Plans
The future of Nepal’s electricity sector looks promising, with ambitious long-term goals set to transform the energy landscape. By 2028-29, Nepal aims to have an installed capacity of 10,000 MW, with a long-term objective of generating 28,000 MW by 2035. These targets are supported by nearly 7,000 MW of ongoing projects at various stages of construction. The expansion of capacity will not only meet domestic demands but also bolster exports.
In addition to hydropower, the Nepal Electricity Authority (NEA) has outlined plans to sign power purchase agreements (PPAs) with solar projects up to 800 MW. This diversification within the energy sector enhances Nepal’s energy security and export potential, reflecting a well-rounded approach to scaling up the country’s energy capabilities. By investing in both hydro and solar power, Nepal can ensure a more resilient and efficient energy system, paving the path for sustainable economic growth.
Strengthening Ties with India
The burgeoning electricity trade between Nepal and India underscores the strengthening of bilateral relations. The Indian Embassy in Nepal has acknowledged that this energy cooperation aligns with India’s neighborhood-first policy, emphasizing mutual benefits and regional stability. The deepening energy ties are not just transactional but also strategic, fostering goodwill and regional cooperation.
Medium-term power sales agreements, such as the one with Bihar for the first time and another with Haryana, are symbolic of this growing partnership. These agreements ensure a stable revenue stream for Nepal and reinforce the long-term cooperation necessary to achieve these energy goals. The collaboration further cements the bilateral relationship, creating a framework that supports economic growth and stability for both nations.
Challenges and Opportunities Ahead
Despite the considerable progress, challenges remain in sustaining and enhancing Nepal’s electricity trade. Political instability in neighboring countries, like Bangladesh, has already postponed planned agreements for power exports. Such factors highlight the intricate geopolitical and economic landscape that Nepal must navigate to capitalize on its energy potential. These regional dynamics underscore the importance of strategic planning and stable governance in achieving energy export goals.
Nevertheless, the opportunities far outweigh the challenges. A USAID report projects that by 2030, Nepal could earn up to Rs310 billion annually by trading electricity with India, potentially rising to Rs1,069 billion annually by 2045. Achieving this vision requires substantial investment, estimated at Rs2,596 billion by 2030 and an additional Rs2,216 billion between 2031 and 2045. These investments are pivotal for realizing Nepal’s ambition of becoming a powerhouse in regional energy trade, laying the foundation for long-term economic prosperity.
Transforming the Trade Deficit
Nepal’s dynamic rivers and mountainous landscape have long promised great hydroelectric potential. Recent strides have transformed this promise into a reality, shifting Nepal from an energy-deficit nation to a net exporter of electricity. This monumental change represents a critical evolution in the country’s economic framework, opening up new opportunities to tackle its longstanding trade deficit. As Nepal plans for the future, the focus is on harnessing its hydropower resources to rejuvenate its economy. This piece explores recent achievements, historical obstacles, and the promising outlook for Nepal’s electricity exports. By examining these elements, we can understand how they contribute to the nation’s economic growth and transformation. The shift towards becoming an electricity exporter not only solidifies Nepal’s position in the regional energy market, but also has the potential to bring about sustainable development and improved living standards for its population.
